Posts Tagged ‘immigration cut’

So the NZ Labour Party is proposing to cut immigration to help reduce the rapidly rising cost of housing. There has been a lot of confusion about how this is intended to be done – whether to cut temporary visas or residence visas for example.

Labour leader David Cunliffe is now stepping away from the more contentious comments, indicating the whole thing has been a media beat up. While to some degree this may be true I clearly remember Mr Cunliffe stating there is “open slather” on the current immigration system. So is there “open slather”?

Ignoring historyThe party appears to have settled on visas being issued through the Skilled Migrant Category as the problem – people on temporary work visas generally don’t buy houses – but this ignores history.

Skilled Migrant is the largest residence stream and is managed through a points system. The Labour Party have most recently indicated they would use this points system to manage numbers on the basis that reducing numbers would reduce pressure on house prices.

I say this ignores history as over the past five years the Skilled Migrant Category has been slashed by a third. This reduction has had no apparent effect in lowering house prices.

Here is a graph of residence visas granted since 2008/09:

Source: Immigration New Zealand Residence programme statistics
As 2013/14 figures are only available to 4 May (307 days of the year) I have calculated a figure based on this for 365 days.

To explain the categories:

Skilled Migrant – skilled workers meeting a stringent points system.

Other business/skilled – investors, entrepreneurs etc.

Humanitarian – refugee quota, pacific quotas.

Capped family – family members of migrants (only parents can use this now).

Uncapped family – foreign-born partners and children of NZ citizens and residents.

Changes since 2008/09Clearly the Skilled Migrant stream is by far the largest single stream and this is because the residence programme is designed to fill skill gaps.

While most of the streams have changed very little, numbers coming through the Skilled Migrant stream are down by 32%. Over the past five years nearly 32,000 less people have gained residence visas through this category compared to 2008/09 levels.

Manipulating the points system

So why have these numbers fallen so far? Because government has been managing numbers using the Skilled Migrant category points system – the same tool Labour proposes to use to reduce house prices now.

Government has incrementally been raising the bar on the Skilled Migrant points system since January 2010 by reducing the types of applications accepted – at the first stage called Expressions of Interest or EOIs.

For example before January 2010 any EOI scoring 100 points or more stood a very good chance of being selected to begin the process. Since January 2010 – across 112 selections – only EOIs with bonus points relating to skills in long term shortage have been selected.

Additional changes in June 2011 and January 2013 further reduced this to the point where the only EOIs being routinely selected now are those with 140 points or a skilled job offer. All of the data is provided by the immigration department and available for analysis.

The natural result of less people entering the system has been less visas being granted: using the points system to manage numbers.

Source: Immigration New ZealandAgain as 2013/14 is incomplete I have used the average for this year for the last 3 selections to go to complete a total year figure.

I am not aware of a resulting drop in the cost of housing in New Zealand.

I am aware however of a huge increase in skill shortages with 59% of employers reported as struggling to find key staff. Skill shortages directly reduce the number of jobs and training opportunities for New Zealanders while lowering wage growth and company profits – arguably one of the reasons the NZ economy has failed to pick up.

The original quotas were set at a level in 2002 for a reason and had been working very well. Since these changes were implemented government has missed minimum quota levels by an average of over 4,600 per year (10%).

Summary
Labour’s proposal then is for more of the same to produce a different result.

Wasn’t it Albert Einstein who defined insanity as “doing the same thing over and over again and expecting different results”?

The Labour Party, in the lead up to this years’ election, is proposing to cut immigration to help reduce the rapidly rising cost of housing as covered in the Press today and echoed by Phil Twyford on The Nation this morning.

“Labour’s proposal would, in part, see the “points system” under which skilled migrants get entry to New Zealand tweaked in response to net migration flows.”source

So what’s wrong with this policy?

Well there are quite a few problems, but the main one is that doesn’t work.

A few issues
Some of the main issues with this have been identified in todays’ article, for example that the Permanent and Long Term Migration figures being used cover everyone coming in for a year or more (working holidaymakers, students, temporary workers and residents), the vast majority of which would have no intention of buying a house here.

When Labour talks about the “points system” what they mean is a system used in assessing applications under the Skilled Migrant Category (SMC) of New Zealand’s Residence Programme. Points are awarded for age, work experience, qualifications with weighting towards having skilled employment here, especially if this is in an area of long term skill shortage.

There are a number of problems with using the SMC to manage immigration like this such as:

Time lag
It takes on average between 8 and 12 months for an application to go through this process, longer if the person is offshore. Any changes will take a very long time to have an effect.

Numbers
If Labour is planning to use this immigration route to manage immigration by 25,000 to 35,000 there is a problem – only 18,156 visas were granted through this stream last year. A cut could easily see the entire stream canned.

While some people might think that would be a good idea, remember that NZ is in an international battle for skills, trying to attract top migrants here to fill skill gaps. We’re not talking about gaps which can be met by training a few I.T. graduates as the article suggests, we’re talking about attracting qualified professionals who already have years of experience.

I was talking to a Christchurch employer recently who confirmed for every highly skilled foreign worker (usually with 10+ years of experience) they employed they could employ and train at least 2 New Zealanders.

Incentive
So under this policy SMC points will move around in an unpredictable way. Is it an incentive for migrants to have to pay $2,320 to enter a system where the goal posts are continually moving? We need more transparency in immigration, not less.

Ignoring history
Finally there is one major problem with this policy – it doesn’t work. We know it doesn’t work because it hasn’t.

Successive changes were made by government in January 2010, June 2011 and January 2013 to make the SMC points system harder to get through, as a result visas granted have dropped by 32.78% compared to 2008/09. The effect of this has been nearly 32,000 less people allowed residence visas under SMC during the past five years.

What effect has this had on Auckland house prices? Why would further cuts have a different effect?

Interestingly during the same period (25 July 2011) “residential property development” was added by the government to the list of acceptable investment types for wealthy overseas investors to apply for visas here. Just sayin’.

Why New Zealand is losing the international battle for skills

According to Wikipedia “Immigration” is the act of passing or coming into a country for the purpose of Permanent Residence.

It’s a pretty popular idea! According to a Gallup poll run in 2009 roughly 700 million adults would migrate to another country if they had the chance.

Favourite dream destinations were Europe (30%); the USA (24%); Canada (6.5%); UK and France (6.5%); Spain (5%). Interestingly just as any people (25 million or 3.6%) wanted to move to Germany as Australia. New Zealand is not mentioned.

I guess it depends on who you ask, but most of the 500+ people I met at the 2008 Opportunities Expos in the UK were interested in what they call the ‘Big Three’: Australia, Canada and New Zealand.

The Big Three
Migration is split into two main groups: skilled (workers and entrepreneurs) and family reunification. What we have seen in the past couple of years has been some pretty big changes with the Big Three:

Australia: Increasing their ‘Skill Stream’ by 11 percent, from 113,850 last year to 125,850.

Canada: Increasing their ‘Skilled Migrant’ stream by 22 person, from 153,491 last year to 186,881.

New Zealand: Decreasing the ‘Skilled Migrant Category’ by 13 percent, from 31137 last year to a capped 27,000 this year.

Skilled Migration Comparison

Bucking the Trend

So New Zealand is busy heading in the opposite direction to Australia and Canada, but why?

Um, actually I have no idea, I was hoping someone could tell me.

Since 2001 the New Zealand Immigration Programme has had a target quota for Residence Approvals of between 45,000 and 50,000 and that hasn’t changed. Ministers have constantly spoken about the benefits and need of migration, but keep on cutting numbers.

Residency applications are split into four groups: Skilled/Business (61%); Humanitarian (9%); Parent/Sibling(12%); and Family Sponsored categories (18%) (percentages are averages since 2001). The Skilled Migrant Category, part of the Skilled/Business group, is the single largest sector making up over 55 percent of all Residency Approvals.

(Click for enlargement))

The immigration department’s year runs from July to June so we don’t have a full year to look at, however figures are available to May 2011.

Comparing the 11 months from July 2010 to May 2011 against the same period in the previous year we see some interesting differences.

#1 difference is an overall drop of 4,721 approvals.

#2 difference is that the group most affected is the Skilled/Business stream.

An uneven drop

As you can see from the previous graph, the drop in numbers has not been even, in fact numbers for the Humanitarian and Parent/Sibling groups have increased slightly. Both the Skilled/Business stream and Uncapped Family streams however have fallen.

Looking a little deeper at the Skilled/Business stream (which includes the

Skilled Migrant Category, Work to Residence, Entrepreneurs and Investors) the real drop has come from the Skilled Migrant Category. Through this period there have been 5,150 less applications approved in this stream, an actual drop so far this year of over 21 percent.

So while Australia and Canda are increasing their Skilled Migrant streams, New Zealand has cut the capped amount by 13 percent and actual numbers by over 21 percent over the past 11 months. This is not a blip or mistake, this is a policy being implemented. From January 2010 applications being accepted under the Skilled Migrant Category were cut by 30 percent and this is the result.

It takes time for changes like that to filter through the system with the effect first showing in July 2010. This means that numbers will continue to fall over the coming months no matter what changes might be belatedly made to increase the count.

(Click for enlargement))

Temporary Work Visas

So is the New Zealand government leaning towards temporary visas rather than permanent? In a recession this can be a useful strategy to get industry moving.

Comparing the same eleven month period of June 2010 to May 2011 to the same period in the previous year we can see that this is not the case. Overall approvals for temporary work permits have dropped by 15,822 (10.3%) to 137,890.

Some areas such as the working holiday schemes are fixed, meaning that this shortfall also comes from the 'Skilled' areas:

Graduate jobsearch: down 2,765 to 8,727, a drop of 25%

Long Term Skills Shortage: down 154 to 386, a drop of 28.5%

Essential Skills: down 7,201 to 20,701, a drop of 25.9%

Skilled Migrant: down 308 to 892, a drop of 25.7%

So New Zealand has also cut temporary skilled migration by over a quarter.

New Zealand is losing the international battle for skills

While Australia and Canada are attracting the most desireable globally mobile skilled workers New Zealand has implemented a policy to cut these numbers.

As a result skill shortages in New Zealand are reaching a critical boiling point.

While training programmes are planned to provide semi-skilled workers and graduates New Zealand business has been starved of skilled, qualified and experienced staff. Also contributing to this problem has been a drop in wages and conditions over the past two years causing an increase in numbers of the mostly highly skilled staff heading to Australia. Record numbers are now leaving New Zealand for Australia.

A looming disaster

I believe a disaster in New Zealand employment is coming, a disaster which move2nz predicted and warned the Immigration Minister Dr. Jonathan Coleman of in March 2009, soon after he took office. Sadly this feedback has been completely ignored and as a result New Zealand business will soon be in serious difficulties.

While immigration could be used to help the position bureaucracy has massively increased leading to long delays for processing. Any changes to migration numbers to correct this situation will take months to actually filter through because of this and it is my strong belief that New Zealand jobs and businesses will suffer as a result.

So where does this leave you, the migrant?
Some time soon either the current Immigration Minister, or if the government changes in November the next Minister, will need to make swift changes to correct this catastrophic imbalance. Initially this will likely only be aimed at temporary workers, for example with the rebuild of Christchurch, but that will lead to opportunities for Residency.

Migrants with skills and experience who are prepared and ready may very soon have excellent opportunities to find work in New Zealand, helping to grow our economy, create jobs and finally push New Zealand's economy out of the doldrums. So have your application ready, the next six months may be very interesting!

Statistics taken from the Immigration New Zealand website.

Please note that I am not a licensed immigration adviser and this article is not intended in any way as individually tailored immigration advice.